Ministry drafts bill to cap foreign ownership in Russian banking sector to 50%
MOSCOW. April 9 (Interfax) - Russia's Finance Ministry has drafted a bill that would limit foreign capital in the combined equity of Russian banks to 50%.
The bill, posted on the ministry's website, would amend Article 18 of the Law on Banks and Banking. This law currently states that the quota on foreign ownership in the Russian banking system is set by law on the recommendation of the Russian government, agreed with the Central Bank.
A note attached to the bill states that there is currently no limit on the participation of foreign capital in the Russian banking sector. The previous quota of 12% was eliminated in 2002, but it was never actually applied because while it was in effect the share of foreign capital was less than 12%.
The authors of the bill reckon it will close gaps in regulation of the scale of foreign capital in the Russian banking sector, and bring bank legislation in line with obligations on access to the banking services market that Russia assumed when it joined the World Trade Organization.
The quota for participation of foreign capital in the banking system will be calculated by the Central Bank as of January 1 of each year. The calculations will not take into account investments in banks made by nonresidents that are controlled by Russian residents, or by the subsidiaries of foreign banks operating in Russia; investments made prior to January 1, 2007; equity investments in banks in which the Russian Federation, a Russian region, the Central Bank or a state corporation own more than 50% and which were privatized after August 22, 2012; as well as investments amounting to 51% or more of a bank's charter capital made after January 2007 and owned by the investor for 12 years or more.
If the quota is reached, the Central Bank will be able to stop registering banks with foreign investment and issuing them banking licenses. The Central Bank also has the right to prohibit an increase in a lenders' charter capital with foreign funds or the sale of shares to nonresidents if the quota for foreign capital participation would be exceeded as a result.
The bill also stipulates that the Central Bank, in coordination with the government, has the right to impose restrictions on banking operations for lenders with foreign investment if the corresponding foreign countries impose restrictions on banks with Russian investors and the branches of Russian banks.
